As 2020 works its way through the last quarter at the end of summer time, daylight hours recede, the nights get longer and with Covid-19 looking set to be with us for some time to come and Brexit issues looming, there does not seem to be a lot to look forward to in the next few months.

Having got that out of the way what, if any, are the positives? Winter crops are looking well following a good autumn sowing spell and sufficient rain to get the crops onto a good footing going into winter.

Over recent weeks and months, global wheat prices have gained momentum and UK wheat futures have risen as a result and has seen the Chicago Board of Trade futures close to a six-year high. This price rally has supported a rise in domestic wheat prices, with the UK May, 2021, futures contract up £10.75 since September 10 – at which point the contract broke above its previous high for 2020 set in March and last week reached £191 per tonne.

On Monday, January, 2021, futures reached £189.65 – which was up from £183.70 at the end of the previous week – and November, 2020, futures stood at £189 per tonne and March, 2021, hit £190.05. Looking further forward, new crop UK futures have also benefited from this recent price rally, up £5.25 since the start of October with November, 2021, futures closing at £161.60 and November, 2022, wheat futures currently standing at £158.40.

Dry conditions globally, in many wheat growing countries have been the primary reason for the recent price increases. Soil moistures in Russia have fallen to record low levels and prolonged dry weather has been an increasing concern for wheat crops in Argentina, the US and Russia.

Russian farmers have drilled record areas of winter wheat on land that has received no more than 20-40% of its normal rainfall. If, however, they do receive some timely rain soon this could change the outlook for their future wheat crop and prices could drop accordingly.

Another factor to consider is a yield increase in the Black Sea area, where during the past 20 years Russia has improved average wheat yield by 40% and the Ukraine by 60%. This is due to better farming method,s including updated technology and better agronomy, thus encouraging Russia to increase its wheat area by 17% since 2000.

Global warming has also been a factor, as countries face milder winters and less winter kill. This has allowed an increasing proportion of winter sown crops, rather than in the spring, which contributes to higher yields.

Russia remains desperate for rain, though, and the acres there are looking at losing between 10 to 15% of the drilled wheat area, against a 'normal' crop loss of around 5%. So, even with better yields from improved growing techniques, yields there will still be 30-50% below the EU-28 average.

The US is also experiencing its most widespread dry spell since 2012, but there is still ample time for the crop to perform well, though rainfall will need to be regular and timely throughout this growing season to support reasonable 2021 yields. So, concerns about possible lower US winter wheat supplies have been a driver for the futures market as, threatened crops in the Black Sea area, plus Russia and Ukraine.

Together these areas supplied 42% of all global wheat exports from 2015-2020. Some of any potential gap may be taken up by Australia, which is looking to produce around 30m tonnes of wheat – or double the volume of their last year’s harvest.

There is the chance, though, that Australia – which is having plenty of rain at present – could get too much of the wet stuff, which could delay harvest and harm quality.

Global wheat production this past season is still set to reach a record level of 773m tonnes, or 115m tonnes higher than in 2012-13. This would result in world wheat stocks rising by 22m tonnes to 322m tonnes.

To highlight how wheat prices have risen, last year at this time Algeria bought 600,000 tonnes of milling wheat at $229/tonne including freight, this past week it bought 720,000 tonnes for December delivery at $276/tonne, which is a 20% increase.

Egypt remains, though, the biggest importer of wheat globally and between July and August purchased 2.4m tonnes. In the first two months of the 2020-21 season, it increased purchases by almost 40% year-on-year and this is another factor in why global wheat prices have gained momentum, including UK futures.

Russia’s 2020 wheat harvest at 83m tonnes is the second largest ever and they have had a very fast export pace, which resulted in domestic flour prices rising to record levels and so is now looking to restrict exports from the end of this year.

This will put pressure on importing countries and it is no coincidence that the UK wheat balance sheet is set to be the tightest in a number of decades due to a significant drop in total availability, outweighing a reduction in wheat usage. Defra provisionally put UK wheat production for 2020 at 6.1m tonnes down year-on-year at the lowest level in nearly 40 years at 10.1m tonnes.

Total availability is forecast at 14.7m tonnes, which is a huge decrease of 23% on the year. Latest estimates put domestic consumption at 13.6m tonnes, or 1m tonnes less than last year. This leaves a balance of supply and demand of 1.1m tonnes, or almost 3.5m tonnes lower than last year.

The EU wheat crop is estimated at 129.5m tonnes which, if correct, would be 17.2m tonnes less than last year. The EU has increased its wheat export target to 25m tonnes, which is 10.5m tonnes down on last year.

Exports between July 1 and October 11 reached 5.73m tonnes and for the 25m-tonne target to be reached, average weekly shipments would need to increase by 140,000 tonnes for the rest of the season. That would be a hard target to achieve.

Feed barley prices had also risen on the back of increased wheat prices and there is good demand as UK barley is competitive against other countries. It would appear that there will be good export business to Europe from both Scotland and England up to the end of the year and with Brexit getting ever closer, traditional long holders of feed barley are opting to sell before the end of December.

Though feed barley prices have increased, barley is still at a $40 discount to wheat at Black Sea ports.

The French barley crop for this season is estimated at 10.5m tonnes which is 3.2m tonnes down on last year and puts EU barley production at 63.8m tonnes and puts the amount available for export at 7m tonnes, 1.1m tonnes below the exportable tonnage last year.

Domestic UK oilseed rape prices are up £5 per tonne over the past week and currently sit at £50 above levels traded back in March this year. Prices have been helped by falling stock levels of all oilseeds in the major exporting countries following the recent high Chinese oilseed purchases as well as growing concerns about dry conditions in Europe and how this could impact on supplies from the 2021 harvest.

All eyes are on the state of the Australian canola harvest which is just getting underway as Europe is relying on imports from that part of the world to arrive here in early 2021, but good yields out there could see prices easing back from current levels.

There is still optimism for strong oilseed prices given the recovery of the Chinese pig herd, with pork production predicted to have risen by 18% to 8.4m tonnes from last year and this month around 24m pigs are expected to be slaughtered – an 8% increase from September but still falling short of the 45m typical monthly requirement.